Holiday spending presages sustained recovery
Anti-epidemic efforts in China affect travel, but boost consumption, production
Published: Feb 07, 2021 09:18 PM Updated: Feb 07, 2021 10:27 PM

A sales representative arranges gold chains at a jewelry outlet in a department store in Taiyuan, North China's Shanxi Province. Global gold and silver prices have surged in recent weeks and the China Gold Association on Tuesday reported a 38.25 percent year-on-year decline in gold consumption to 323.29 tons in the first half of the year. Photo: cnsphoto

While memories of a virtual standstill during last year's Chinese New Year remain raw and fresh, recent bustling scenes of consumers across the country rushing to buy up everything from expensive gold jewelry and distilled spirits to groceries and other everyday goods ahead of the upcoming holidays offers a vivid testament to the country's steady, ongoing recovery from the COVID-19 pandemic that continues to ravage many parts of the world.

While concerns over a possible resurgence of the deadly virus and strict anti-epidemic restrictions on holiday travels remain, Chinese consumers appear unfazed when it comes to holiday spending, as they engage in a massive shopping spree both online and offline, backed by a confluence of factors, including the largely contained domestic epidemic situation, a robust economic recovery and desire to make up for what some have called a lost year due to the COVID-19 pandemic.

Coupled with other favorable conditions for economic activities, including "stay in place" orders that have kept factories humming and ever-growing foreign demand for medical and other supplies, the solid holiday spending will likely further lift the world's second largest economy to new heights in the first quarter of 2021 and set in motion a more sustained and robust recovery ahead, despite lingering risks, analysts said.

Bustling scenes    

In the latest signs of the busy ongoing holiday shopping spree, jewelry shops in many cities across the country and online shopping platforms are seeing a shortage in supply of pricy gold jewelry and Kweichow Moutai Baijiu, or distilled liquor, as demand surges ahead of the Chinese New Year, which falls on February 12 this year, according to interviews with sources at several shops and companies.

"There are many more customers who came to buy gold before the holiday this year than last year. Since January, sales have already doubled or tripled those of last year," a worker at a jewelry shop in Beijing surnamed Zhou told the Global Times on Sunday. Zhou said that workers have been working overtime to meet the sales surge. Gold jewelry with the Chinese character for "happiness" is particularly popular this year, as many are seeking blessings and safety, he said.

That rising popularity is not exclusive to the capital city. In fact, shops across the country have seen a huge surge in demand for gold jewelry in recent weeks, with some shops even seeing shortages and factories operating at maximum capacity, the Futures Daily newspaper reported on Sunday.

The rising demand for gold jewelry is significant because it shows that many consumers have become more comfortable spending on expensive items and in turn more confident in the overall economic outlook, in stark comparison to the downturn in 2020, analysts noted. 

"[Rising demand for gold products] has a positive correlation with the recovery of our country's economy. Economic recovery in a given place would drive up wealth and result in diversified asset allocation, namely increased gold purchases," Zhang Chen, an analyst with First Futures, which studies precious metal markets, told the Global Times on Sunday.

Last year, China's gold consumption fell 18.13 percent year-on-year to 820.98 tons in 2020, with first quarter sales plunging nearly 50 percent, as the COVID-19 pandemic hit sales, according to the China Gold Association.

Also in high demand ahead of the Chinese New Year is the famous Moutai Baijiu, a widely recognized high-end gift for friends, family, business associates and alike. The top-shelf type of Moutai is seeing a widespread shortage even with doubled or tripled prices. The regulator sets its price at 1,499 yuan ($232) per bottle.

There is high demand every year, "but due to the epidemic and 'stay in place' holiday policies, many are spending a lot of time at home leading to the early sell out," an employee at online shopping site told the Global Times.

A source with the public relations department of supermarket chain Wumart said that usually the producer, based in Southwest China's Guizhou, sends batches of supplies ahead of the holidays, but it has not arrived this year possibly due to shortages.

However, even without Moutai, Wumart, one of the largest retail shops in the country, is seeing surging sales of everything, including nuts, meat, milk and other daily goods. "The pre-holiday consumption is not bad," the source told the Global Times.

Nationwide, after a government-backed online shopping event for holiday-related goods kicked off in January, total sales reached 510 billion yuan as of Thursday, with skyrocketing sales seen in food, recreational and fitness equipment such as mahjong and jump ropes, according to data from the Ministry of Commerce.

Also pointing to strong consumer spending is the surging pre-sale box office in the Chinese film market during the holiday. Latest industry data showed on Sunday that pre-sale box office takings have reached 400 million yuan, with single-day box office sales for New Year 's Day reaching 350 million yuan, despite strict anti-epidemic rules.

Robust recovery  

"Both the effective control of the epidemic this year and the active implementation of government policies can greatly promote the blowout growth of consumption," Hong Tao, director of the Institute of Business Economics at Beijing Technology and Business University, told the Global Times on Sunday.

Lifted by various stimulus policies for consumption, including coupons and digital red envelopes, retail sales, a main gauge of consumption, could see a 10 percent increase during the holidays, compared to a 20.5 percent plunge during the same period last year, according to Hong.  

That is particularly significant for China's overall economic recovery, as consumption has become the biggest growth driver but has seen moderate recovery in 2020, with full-year retail sales dropping 2.3 percent year-on-year even after a 5.2 percent growth in December. In comparison, exports and fixed-asset investment - the other two main growth drivers - saw solid increases of 4 percent and 2.9 percent in 2020. That led to a 2.3 percent growth in total GDP, the only growth among major economies.

Robust sales during the Chinese New Year will help lift consumption and in turn overall economic growth, analysts said, with some predicting a record high GDP growth rate of over 20 percent for the first quarter of 2021. However, much of that is due to the low base in the first quarter of 2020 and would not erase the continued struggle in some sectors, analysts added. 

While the stay-put orders and other anti-epidemic efforts spurred much online consumption, other sectors such as transport, tourism and services will be hit, as the number of trips will be limited. For instance, the number of passengers on the public transport system dropped 76.3 percent year-on-year on Saturday, according to the latest official data.

However, there is also an upside on the stay in place orders, which mostly affects migrant workers at factories in big cities. With many are staying put and even working through the holidays, production is expected to pick up significantly during the usually quiet season, making up for lost time last year, analysts said.

All factors considered, especially with a strong rebound in consumption, China's economy growth rate could reach as high as 8 percent in 2021, above the around 6 percent pre-pandemic levels, Hong said.

But beyond the economics, for many Chinese, the ability to celebrate a much "safer" new year this year unlike the dark period in 2020 - thanks to China's effective anti-epidemic efforts - itself calls for celebration. 

"It's not an easy time for the whole world, so we will treat ourselves better during this holiday. Obviously, that means more 'chopping hands' [spending money] for me," Hai Xiaoping, a resident in Chengdu, Southwest China's Sichuan, who has been stocking up on everything from imported snacks to designer hand bags, told the Global Times.